Dhillon/Chen: What's next for the big exchanges?

Has the time come for exchanges to rethink their business model?

Exchanges have traditionally relied on the revenue stream
from execution spreads, however, with trading volumes declining
(due, in part, to stagnant interest rates) and the new raft of
regulation such as MiFiD, EMIR, Dodd-Frank entering the market,
has the time come for exchanges to re-think their business
models?

Over the past year, we have seen a frenzy of M&A
activity where a number of the established exchanges have
attempted to merge with, or bid for, other exchanges. The
primary driver for exchanges seeking out mergers and
acquisitions is to achieve economies of scale. However, given
the recently failed merger between Deutsche Börse and NYSE
Euronext, along with the LSE and TMX Group and Nasdaq and NYSE
Euronext, exchanges will have to look again at their strategic
options.

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